By Max Starkov, President & CEO at HEBS Digital
Earlier this week, the European Technology and Travel Services Association (ETTSA) released a report called "Hotel Distribution Costs," examining the costs associated with direct and indirect distribution channels for hotels, together with the impact of channel shift.
ETTSA is an organization "representing and promoting the interests of global distribution systems (GDSs) and travel distributors (read: OTAs), towards the industry, policy-makers, opinion formers, consumer groups and all other relevant European stakeholders."
The report, prepared by a consultancy called Infrata, concluded that hotels that attempt to boost direct bookings at the expense of agencies and OTAs risk having lower occupancy rates with "no measurable" savings on costs, and suggested the main reason for hoteliers to push direct sales is to "reduce transparency for consumers."
The ETTSA report uses "a magic wand" to convince the naïve or whoever is listening that hoteliers would be much better if they abandon their useless direct distribution efforts and rely on the OTAs for their distribution. The report's highly selective "analysis":
- Dramatically overstates the effect of the much discredited "OTA Billboard Effect"— remember the unfortunate Cornell University "study," financed by the OTAs? This study, disproved many times over, tried to convince hoteliers that they should use OTAs in order to generate more bookings from the property's own website, due to the so-called "Billboard Effect."
- Underestimates the complexity of the online travel consumer journey: Today's travel consumer engages in 38,983 digital micro-moments in just under two months, and the average travel consumer journey takes about 17 days, eight research sessions, 18 site visits, and six clicks before making a hotel booking (Google Research).
- Tends to over-estimate the hotel's direct distribution costs and undervalue OTA distribution costs, which go beyond the OTA commissions, and include costs associated with revenue management, APIs, GDS, CRS and channel management systems, etc. OTA channel management alone occupies an increasing share of the revenue manager's bandwidth, which means rising payroll and benefit expenses.
- Does not account for the fact that direct booking costs are fixed, while OTA distribution costs are percentage of room revenue and grow with higher ADRs or longer length of stay (LOS).
- Makes the rather offensive claim that hoteliers' direct booking campaigns are motivated by the hotelier's desire to "decrease customer transparency."